JLL recently released their Q2 Industrial Stats that indicate a stabilization period is upon Denver, following a period of exponential growth in the industrial market.
- Rental rates dropped for the second quarter in a row. Though this could be worrisome for landlords, it provides tenants with more leverage when looking for space.
- Increased owner/user sales indicates bank and occupier confidence in future economic and business stability.
- Tenants are requesting more flexibility in leases; termination options and shorter terms are being considered by landlords.
Denver’s industrial market recorded 1,199,993-square-feet of total net absorption in the 2nd quarter, bringing year-to-date totals to 1,848,240-square-feet of total net absorption.
Second quarter absorption hit an all-time high and was primarily driven by three full building move-ins contributing to POSITIVE absorption: Breakthru Beverage moved into its 647,000 s.f. BTS project in the I-70 / East submarket, UPS occupied 357,555 s.f. at Eastpark 70 Building 1, and Best Buy moved into its 251,680 s.f. BTS project.
Three deals contributing to NEGATIVE absorption this quarter include: U.S. Postal Service and Buehler Moving & Storage vacated 278,812 s.f. at 20101 E 36th Drive, ProPak moved out of 135,546 s.f. at 5501 Peoria Street on the I-70 corridor, and Apria Healthcare vacated 100,550 s.f. at 7910 Shaffer Pkwy in the Southwest submarket. In the 1st and 2nd quarters, the market recorded positive net absorption overall. However, the majority of this was driven by large BTS move-ins.
Metro-wide average asking rates declined by 1.09 percent from last quarter to $7.25 per square foot, up 1.8 percent y-o-y, and 60.8 percent since Q2 2010. Due to lagging rental rate growth, we believe this indicates a long awaited stabilization period. Amongst other things, this could signal a shift toward neutral conditions or tenant-favorable conditions in some submarkets.
Since Q2 2010, total vacancy declined 380 basis points to 4.2 percent, down 20 basis points quarter-over-quarter.
Total net absorption Q2 (sf): 1,199,993
Total vacancy: 4.2%
Average asking rent ($ psf): $7.25
Rent growth (last qtr.): -1.09%
Rent growth (year ago qtr.): 1.8%
Rent growth vs. Q2 2010: 60.8%